BC BUDGET: Payroll tax replaces medical premiums

The B.C. government will phase out Medical Services Plan premiums a year earlier than promised in the last election, and impose a payroll tax on larger businesses to recover some of the revenue collected by Canada’s last remaining health care charge.

The “employer health tax” takes effect Jan. 1, 2019 and applies to businesses with annual payrolls of more than $500,000, some of which now pay MSP premiums on behalf of their employees. The tax rate is 1.95 per cent for businesses with payroll above $1.5 million, with reduced rates for payrolls between $500,000 and $1.5 million.

Businesses that pay employees’ MSP, at a rate that was cut by half at the start of 2018, will also pay the payroll tax for a year, before MSP is ended on Jan. 1, 2020. People who pay their own MSP will save an average $900 per year for individuals and $1,800 for families when MSP is eliminated.

Finance Minister Carole James said the decision to stop MSP and recoup some of the revenues via tax is similar to what other provinces have done, and B.C.’s payroll tax has a lower rate than Ontario, Quebec and Manitoba. The tax is expected to raise $1.9 billion per year, compared to $2.6 billion collected when MSP was at its highest rate in 2016-17.

Consultation showed that getting rid of MSP premiums early was preferred for individuals as well as businesses, James said.

“They’re complex, they’re tough to administer, and we’ve heard that over and over,” she said.

Revenue from the new tax will help pay the $1.5 billion increase in health care spending over the next three years. That includes $548 million over three years to improve care for seniors and $150 million to provide primary care teams for people who don’t have a family doctor.